Although the companies have overcome several substantial obstacles facing their proposed merger, Sprint and T-Mobile are not done yet. There are still a few significant roadblocks the companies must address before their merger can close.
Here's what's probably going to happen next, in the order it will probably occur:
1. An appeal
The first thing that executives from Sprint and T-Mobile will be looking for is whether a group of Democratic state attorneys general (AGs) will appeal their courtroom loss. Judge Victor Marrero of the U.S. District Court for the Southern District of New York this week said he would not block the proposed merger of Sprint and T-Mobile, as the state AGs had sought.
According to Cnet, the states – led by New York Attorney General Letitia James – are now considering an appeal of Judge Marrero's ruling.
"We believe an appeal process, in its entirety, could take more than 6 months," wrote the Wall Street analysts at Lightshed in a post. "However, we do not believe T-Mobile would suspend the closing of its transaction while it waits for the outcome of an appeal. The States could attempt to secure a court-ordered stay on the closing of the deal pending the outcome of the appeal process. It is our belief that a stay would be very difficult to secure."
And the Wall Street analysts at Raymond James wrote in a note to investors that the state AGs can only appeal on the facts surrounding the ruling rather than the decision itself.
2. Tunney Act review
In a bit of legal minutiae, antitrust decisions by the Department of Justice must be reviewed by a judge, according to the Tunney Act of 1974.
As noted by the Lightshed analysts, Judge Timothy Kelly – a 2017 appointee of President Trump – is currently conducting the Tunney Act review of the DoJ's approval of the Sprint and T-Mobile merger. He was expected to issue his review in November, and it's unclear why he had not yet done so.
The Lightshed analysts said they expect the judge to issue his approval this week.
Others agreed. "We expect him to approve the deal and to issue his decision before the California PUC, so we do not expect it will cause a delay," wrote the Wall Street analysts at New Street Research in a note to investors. "The judge here also has the right to impose some new conditions but if he does so, again, we do not expect them to be material."
3. CPUC decision
Incredibly, the California Public Utility Commission (CPUC) remains the only state telecom agency that has not approved the merger; the other utility commissions around the country have already signed off on the transaction. That does line up with California politics in general, though, considering the state is big enough to impose its will on industries such as automotive.
"It's comical and frankly embarrassing to the CPUC that they have not yet ruled on this transaction, given an 18-month review process. Yet, they have until July 12th to complete that review," noted the Lightshed analysts.
The analysts at Raymond James said they expect the CPUC to issue a verdict on the merger in March.
"We don't think that there is a material risk that the CPUC acting on its own could block the deal," noted the New Street analysts. "We also think that now that the trial court has ruled, there will be significant pressure for the CPUC to act, so that while there may be a short delay, in the course of a deal that may well go past the two-year mark, we would not view a delay as material."
4. The merger could close by April 1
T-Mobile's incoming CEO said he expects the merger to close "as early as April 1, 2020."
There is precedent in the telecom industry for mergers to close while still facing legal challenges. Indeed, AT&T closed its blockbuster merger with Time Warner amid an attempt by the Justice Department to block the deal. The DoJ's effort to block that transaction ultimately failed.
If the Sprint and T-Mobile merger does close, executives likely will hold a major "coming out" party for the combined company. They'd then, hopefully, lay out what they expect to do with their bigger customer base and spectrum holdings. Although T-Mobile and Sprint have outlined their general merger plans, they could well have some "uncarrier"-style announcements planned for the actual close of the merger.
5. Renegotiation of the terms
Sprint and T-Mobile first announced their $26.5 billion merger more than a year and a half ago. Much has transpired in the interim, including the revelation that Sprint was allegedly getting US government subsidies for 885,000 customers that it actually didn't have.
This has led to widespread speculation that T-Mobile and parent company Deutsche Telekom will renegotiate the terms of the merger agreement with Sprint and its majority owner SoftBank.
T-Mobile CEO John Legere said during his company's most recent quarterly conference call with analysts that, if such a renegotiation does occur, it will happen "swiftly after the deal was approved."
The analysts at Lightshed noted that, when the merger was first announced, the financial ratio between T-Mobile/Sprint was reportedly 8:1. The analysts said they expect the ratio to change to 12:1, a 23% change. "At $90 for T-Mobile that would imply $7.50 for Sprint," they wrote.
But would such a change require more government approvals? "We also don't think that the renegotiation is subject to any government oversight," noted the analysts at New Street.
Finally, the analysts at Raymond James noted that Deutsche Telekom executives could provide some color on the terms of a possible renegotiation during that company's quarterly earnings call, currently scheduled for Feb. 20.
6. Actual changes for customers
Sprint and T-Mobile executives have said they expect the full merger process to take three years to finish. That in part would involve the companies shuttering 35,000 redundant cell towers around the country and building 10,000 new towers, resulting in the combined company commanding a total of 85,000 towers. Such a move would likely be designed to make optimal use of T-Mobile's 600MHz and Sprint's 2.5GHz spectrum, as well as the other spectrum bands the companies own.
However, that's a long-term effort. Sprint customers initially will see the biggest changes when they immediately become T-Mobile customers shortly after the merger.
Indeed, according to Cnet, roughly 20 million Sprint customers already own phones compatible with T-Mobile's network, and a "simple software update" would put them onto T-Mobile's service.
As for the companies' employees, executives from Sprint and T-Mobile have promised not to conduct layoffs due to the merger. However, they left open the possibility of restructuring to avoid redundant positions in departments such as HR and marketing.
Meantime, if the merger does close, Dish Network would immediately enter the wireless industry by acquiring roughly 10 million Boost prepaid customers from Sprint, alongside an MVNO agreement with T-Mobile. That would position Dish to offer inexpensive prepaid offerings nationwide under the Boost brand or potentially the Dish Mobile brand.
Dish would also likely immediately begin the construction of its 5G network using its own spectrum holdings. After all, based on its agreement with the DoJ, Dish is on the hook to cover 20% of the U.S. population as soon as June 2022 with its 5G network.